U.S. stocks climb on economic reports

Strategist plays down role of ECB and presidential debate in rally

By

KateGibson

NEW YORK (MarketWatch) — U.S. stocks rose on Thursday, with the S&P 500 index gaining for a fourth day, after weekly data offered a positive read on the U.S. labor market a day before the September employment report.

‘I doubt the market is reacting to the debate. I do think many investors who are paying attention to this have started discounting an Obama win into prices.’
Jim Russell, US Bank Wealth Management

“The market continues to look to data points above expectations, and recently they’ve gotten a few; hopefully, we get a good nonfarm payrolls number tomorrow,” said Jim Russell, chief equity strategist for US Bank Wealth Management in Cincinnati.

The market stayed up after the release of minutes from the last Federal Open Market Committee meeting, which had central-bank policy makers saying they could manage the risk associated with its third round of monetary easing.

After the two-day gathering that ended Sept. 13, Fed Chairman Ben Bernanke and his colleagues said they would purchase as much as $40 billion a month of mortgage securities with the intent of lowering the unemployment rate, which has stalled just above 8%.

The Dow Jones Industrial Average
DJIA, +0.28%
rose 80.75 points, or 0.6%, to end at 13,575.36, with Bank of America Corp.
BAC, +0.15%
and aluminum producer Alcoa Inc.
AA, +0.00%
leading gains that included 25 of the index’s 30 components.

The S&P 500 Index
SPX, +0.28%
rose 10.41 points, or 0.7%, to 1,461.40, with financial and energy shares leading gains that included all 10 of its major industry groups. The Nasdaq Composite
COMP, +0.36%
advanced 14.23 points, or 0.5%, to 3,149.46.

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For every stock falling more than two gained on the New York Stock Exchange, where 661 million shares traded. Composite volume topped 3.5 billion.

It’s the economy

Factory orders also came in better than expected, falling 5.2% in August versus estimates calling for a 5.9% drop.

“We did get some modestly positive numbers regarding jobless claims; we’ve had a week of good data, so equity markets are responding very favorably to what we hope is a period of slightly higher growth than what we had been experiencing during the third quarter,” Russell said.

The Labor Department will release its report on September nonfarm payrolls at 8:30 a.m. Eastern on Friday. Economists surveyed by MarketWatch expect that payrolls rose by 110,000 last month. Unemployment is seen ticking up to 8.2% from 8.1%. Read: U.S. economy still laboring to produce jobs.

“I’ve become even more optimistic in the last week; some of the economic data is getting better, with manufacturing and the whole Fed-ECB stimulus underlying the entire market — that gives us some cushion,” said Andrew Fitzpatrick, director of investments at Hinsdale Associates Inc.

Stock indexes rallied as the dollar
DXY, +0.61%
fell against other currencies, including the euro
EURUSD, -0.7630%
after the European Central Bank left its key interest rate unchanged and ECB President Mario Draghi reiterated the central bank is ready to start buying government bonds as soon as conditions are met by any nations in need of help. See: Draghi vows that euro is irreversible.

“The euro is pretty strong, but it’s not like Draghi said anything (unexpected),” said Peter Boockvar, equity strategist at Miller Tabak.

“Europe closed mixed, so I am not sure Europe really provided a lift. They didn’t take rates lower, so I think they are waiting for what Spain’s decision might be before modifying the rate stance,” said Russell at US Bank Wealth Management.

There has been intense market speculation in recent days over whether Spain is preparing to request a full sovereign bailout, which would potentially pave the way for the ECB to buy the nation’s bonds.

The market’s positive tone could be a “response to the debate last night. He’s still well behind on Intrade, but it’s an improvement from where he was on Friday,” said Boockvar of Republican presidential candidate Mitt Romney’s performance Wednesday night in verbal sparring with President Barack Obama. See a blog post on the market impact and the debate

“The market in the real short term will react positively towards Romney, that’s the less government and more pro-business-type mentality coming through. But the market will adjust to whomever is president,” said Fitzpatrick at Hinsdale Associates.

Russell, however, played down the notion that Thursday’s market climb was connected to the previous evening’s televised debate.

“I doubt the market is reacting to the debate,” he said. “I do think many investors who are paying attention to this have started discounting an Obama win into prices. I do think the market is only looking for and will favor areas that the likely next president will favor, it’s not necessarily taking sides here, just reflecting the poll numbers and the likely winners.”

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